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China is set to take operational control of Gwadar, the deep-sea port built with financial and technical assistance from China on Pakistan's south-west coast, after the Port of Singapore Authority (PSA) has decided to pull out of a 40-year port management and development contract signed in 2007. Now China will also operate the port, which is strategically located close to the Pakistan-Iran border and the Strait of Hormuz in south-western Balochistan province.

Pakistan's ports and shipping minister, Babar Khan Ghauri, has confirmed that the government has issued a no-objection certificate to quit the contract held by the PSA, which is going to sell its shares to a Chinese company. The Singaporean firm decided to quit the Gwadar project after Pakistan's government failed to transfer land needed to develop a free zone, as was promised under a 40-year concession deal signed in February 2007 during former president Pervez Musharraf's regime. Since its official opening in March 2007, the Gwadar port has been unable to become fully operational because of the unsettled issues between Islamabad and the PSA.

Gwadar is an important coastal town in Balochistan. The port has the potential to serve as a secure outlet as well as a storage and transshipment hub for the Middle East and Central Asia oil and gas supplies through a well-defined corridor passing through Pakistan. China has contributed about $198 million (Dh727 million) of the initial investment for the port project.

Under the development plan, Gwadar port will be connected with China's western province of Xinjiang through rail and road links. China's eastern seaboard ports are 3,500 kilometres away from the city of Kashgar in western China, whereas the distance from Kashgar to Gwadar is only 1,500 kilometres. The port facilities are thought to be ideal for China's booming economy. Even if Chinese companies and exporters handle their own cargo, it would make Gwadar port one of the busiest in the region.

Gwadar gives China a land-based oil supply port that is not controlled by superior US naval power. The first thing China is supposed to do as operator is to relaunch the Gwadar oil refinery project, which was halted in 2009, probably because of security concerns in the volatile province. The refinery will have a total capacity of 19 million tonnes of oil per year. The petroleum products produced in Gwadar refinery may be transported to Kashghar in western China by pipeline. The proposed refinery and the oil pipeline is actually a part of a planned Pakistan-China energy corridor.

Gwadar port, through the proposed energy and trade corridors, gives western China access to the sea. Crude oil imports from Iran, the Arab Gulf states and Africa could be transported overland to north-west China through the port.

China considers Gwadar very important for its oil trade, as the present choke point is the Strait of Hormuz, which is becoming congested. In particular, a strategic pipeline from Gwadar to China's borders enables Beijing to import oil from Saudi Arabia. In 2006, King Abdullah reportedly asked Islamabad to help Saudi Arabia to extend oil exports to China.

China is the world's second largest importer of oil, with 80 per cent of imports going through the unsafe Strait of Malacca. A railroad and oil pipeline linking Gwadar with Kashi in western China provides Beijing with the shortest possible route to the oil-rich Middle East, avoiding the Strait of Malacca and the dangerous maritime routes through the South China Sea, the East China Sea and the Yellow Sea. Chinese engineers have already completed a feasibility study for a railroad and oil pipeline, which would enable Gwadar to handle most of the oil tankers headed to China.

The operational control of the port will also enable the dragon to swim in the Indian Ocean, which is strategically important for China as it expands its influence across the region. To ensure the security of shipments along existing routes, a Chinese naval presence at Gwadar could also patrol the Indian Ocean sea lanes. What upsets Washington and New Delhi is the Chinese naval presence near the Strait of Hormuz and its strategy of building a "string of pearls" presence on the Indian Ocean rim.

The US considers Chinese presence in Gwadar a threat to its fleet in the Middle East and also to the strategic oil trade to the Far East and Europe. The US military bases on the Arabian Peninsula expect an interception threat to their communications from Chinese bases in Gwadar.

The quest for energy security has made India and China competitors in the global energy game. China's involvement in Gwadar is believed to be guided by its interest in turning the port into a transit terminal for Iranian and African crude oil imports. Beijing's growing stakes in the port send ripples of anxiety in New Delhi, which interprets it as a move to control strategically important energy sea lanes.

As a competitor of China, India is engaged in developing Chabahar port in Iran that also provides access to the countries of Central Asia and Afghanistan bypassing Pakistani territory. With Chinese involvement in Gwadar and Indians in Chabahar, the two ports are likely to emerge as strategic competitors in the region.

The players of the new great game are struggling to control the proposed transnational energy pipeline routes, and Gwadar is China's key node in the game. It enables China to become a regional policeman monitoring the supply routes for its energy shipments from the Middle East. In fact, China is going to have a key card in its hands as Gwadar port will play a pivotal role in all the major trans-regional pipelines originating from the Middle East, Iran or Central Asia.

The Iran-Pakistan gas pipeline was originally planned to extend from Pakistan to India in 1993. The United States has been opposing the project because of Tehran's nuclear ambitions. After India's withdrawal in 2009, Beijing showed interest to join the project and to build an Iran-Pakistan-China gas pipeline, which could provide a secure overland gas supply.